Tidewater earnings take a hit

Tidewater Inc. (NYSE: TDW) second quarter earnings will be impacted by a settlement with the Department of Justice and by a higher effective tax rate.

Tidewater said today that fiscal second quarter financial results for the three months ended September 30, 2010, are estimated to be between $0.35 - $0.40 on a fully diluted per share basis. The offshore service vessel giant said that it noted that the Thomson First Call consensus estimate for the September 2010 quarter is currently $0.58 per share. Tidewater reported fully diluted earnings of $0.77 per share for the quarter ended June 30, 2010.

The September 2010 quarterly results are expected to include:

A $4.35 million ($4.35 million after-tax, or $0.09 per common share) charge included in general and administrative expenses related to an agreement in principle with the United States Department of Justice to resolve a previously disclosed Foreign Corrupt Practices Act investigation.

An effective tax rate of approximately 34.5 percent. Relative to the company's previously disclosed effective tax rate estimate of 18.5 percent, the September quarter's estimated effective tax rate primarily reflects the company's current estimate for its operating tax rate for fiscal 2011 of approximately 22.5 percent, the cumulative effect on income tax expense for the six-months ended September 30, 2010 of the company's current estimate of its effective tax rate, and the Department of Justice charge, which has no related tax benefit.

The company's current estimate for its operating tax rate of 22.5 percent largely reflects the current expected mix of pre-tax earnings between its U.S. and international businesses and an expectation for lower estimated operating margin in certain jurisdictions that tax on the basis of deemed profits. The company has historically realized lower tax rates in these deemed profits jurisdictions than it now expects to realize in fiscal 2011.

Relative to the company's previously disclosed effective tax rate estimate of 18.5 percent, the impact of the higher effective tax rate on the September 2010 quarterly results is approximately $0.09 per common share.

September 2010 quarterly results are also expected to reflect vessel revenues of approximately $267 million, or slightly higher than the vessel revenues that were reported in the June quarter. Consistent with general estimates provided on the company's August 5, 2010 earnings conference call, vessel operating costs for the September 2010 quarter are expected to approximate $170 million, reflecting sequentially higher repair and maintenance costs (in part, due to the drydockings in the September quarter of two of Tidewater's largest anchor handling towing supply vessels) and a $6 million charge related to the company's participation in a U.K.-based multi-employer pension plan.